05 December 2023

Kyle Grieve chats with Chris Mayer about the special qualities of serial acquirers that make them compelling investments, tricks on how to value serial acquirers, the importance of decentralization for successful serial acquirers, the proper dynamics to look for between the acquirer and the acquired, the proper uses of leverage to use in mergers and acquisitions, characteristics to look for in scaling serial acquirers, the proper management traits to look for in highly successful serial acquirers, and a whole lot more!

Chris Mayer is the Portfolio Manager and Co-founder of Woodlock House Family Capital. He’s also a prolific writer, he blogs regularly on Woodlock House’s website. He is the author of one of the most popular investing books in the last decade, “100 Baggers: Stocks That Return 100-to-1 and How to Find Them.” He wrote “How Do You Know”, and many other books.



  • Successful acquisition strategies.
  • What to look for in scaling serial acquirers.
  • The general aspects of great serial acquirers.
  • Key differentiators between exceptional serial acquirers.
  • Chris’s favorite debt ratios to examine for acquisitive businesses.
  • And much, much more!


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:02] Chris Mayer: They’ll see something trading at 26 times earnings or 30 times earnings, and they’ll think that it’s expensive. But you know when you work out what the return on capital is of that business and you, you could just look at something simple, you could look at ROE, and then you can look at how much they’re reinvesting every year.

[00:00:20] Chris Mayer: So if the ROE is, let’s say 20 percent and they’re reinvesting 80 percent of that, paying out 20 percent of dividends, then you’ve got, 16 percent roughly in compounding. And then your question is, question for you is then, is that good enough for you as an investor? Is it, Is it secure enough?

[00:00:39] Chris Mayer: Is it durable enough? Do you feel good enough about it that you’re willing to sit and wait? And there’s some sliding scale. You’re going to find some that, they’re in 30 percent and maybe they’re doing, they’re paying out again, 20%. Now you’re looking at 24 percent kind of as you’re compounding and you have to.

[00:00:55] Chris Mayer: And that makes a big difference. So then when you think about in terms of a decade out, you just sort of forecast what 24 percent compounded is over a 10 year period of time. It’s a big number. And then you put a multiple on that at the end of 10 years and compare it to today and get your IRR. You can see suddenly if you have a company that’s going to increase earnings six, eight times over the next decade, Suddenly, whether you pay 30 times earnings or 35 suddenly doesn’t seem like you know that, that big of a deal.

[00:01:22] Chris Mayer: Right?

[00:01:25] Kyle Grieve: In this episode, I chat with Chris Mayer about the special qualities of serial acquirers that make them compelling investments, tricks on how to value serial acquirers, the importance of decentralization for successful serial acquirers, the proper dynamics to look for between the acquirer and the acquired.

[00:01:43] Kyle Grieve: The proper uses of leverage to use in mergers and acquisitions, characteristics to look for in scaling serial acquirers, the proper management traits to look for in highly successful serial acquirers, and a whole lot more. My first exposure to Chris Mayer was probably the same as most listeners. From reading his book, Hunter Beggars, Stocks that Return 100 to 1, After reading that, I started looking at his portfolio very closely.

[00:02:07] Kyle Grieve: Even though I had my own framework for quality, his strategies were completely aligned with what I was trying to do. I’d send him some ideas, which he hasn’t bid on yet, and ask him for feedback on my own analysis. He graciously helped me with my thinking on all sorts of topics, especially in regard to Topicus, Evolution AB, Teqnion AB, and Dino Polska.

[00:02:27] Kyle Grieve: I started moving in a similar direction to what he was already doing, which was looking at serial acquirers. The simple reason serial acquirers are so interesting is the mixture of high returns on invested capital and high reinvestment opportunities. The mixture of these two metrics can cause massive shareholder value if the high numbers are sustainable over many years.

[00:02:46] Kyle Grieve: Chris recently joined the TIP Mastermind Community for an incredible Q&A where members got to pick his mind on a variety of investing topics. The subject of serial acquirers came up and I thought it would be great to deep dive into the world of serial acquirers with him. So I reached out to Chris with the idea of talking about serial acquirers rather than strictly talking about multibaggers.

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[00:03:05] Kyle Grieve: If you are interested in learning more about how serial acquirers work, the value they can create, and the differences between a good one and a bad one, you’ll want to tune into this episode. Now, without further delay, let’s get right into this week’s episode with Chris Mayer. 

[00:03:19] Intro: You’re listening to Millennial Investing by The Investor’s Podcast Network, where your hosts, Robert Leonard, Patrick Donley, and Kyle Grieve interview successful entrepreneurs, business leaders, and investors to help educate and inspire the millennial generation.

[00:03:43] Kyle Grieve: Welcome to the Millennial Investing Podcast. I’m your host, Kyle Grieve, and today, we bring Chris Mayer onto the show. Chris, welcome to the podcast. 

[00:03:51] Chris Mayer: Thank you for having me on, Kyle. Good to talk to you.

[00:03:54] Kyle Grieve: Chris is well known for his love of serial choirs. He holds some of the greatest serial choirs out there in Heiko and Constellation Software, as well as some of the less well known names such as Teqnion, Topikus, Lumine, and Brown & Brown.

[00:04:05] Kyle Grieve: So today we’re going to go into a deep dive into the world of serial choirs and pick Chris’s brain about them. Let’s start with the basics, Chris. What is a serial acquirer and why should investors be interested in learning more about the business model? 

[00:04:18] Chris Mayer: I would say a serial acquirer is a business where regular acquisitions are a big part of the company’s growth.

[00:04:27] Chris Mayer: So that’s a very broad definition. But yeah, any company that’s routinely, regularly doing acquisitions to grow. That’s a good working definition of a serial acquirer. So what the appeal is, I think there’s a number of different things. One is, fundamentally they are, as investors, we’re looking for companies, or at least I’m looking for companies that have high returns on capital and, and the ability to reinvest over a long period of time.

[00:04:50] Chris Mayer: So serial acquirers. Meet that need. They, they have long runways and yeah, they have the ability to pull a capital and earn those high returns. So that’s a big part of the appeal. They solve an investment problem. And I think the other part of it is that serial acquirers own a lot of different businesses usually.

[00:05:07] Chris Mayer: So there’s, they’re very resilient. It’s not quite like when you own a company and they are the one or two things. And if one of their products is compromised, somehow you’re, you’re in serious trouble. Usually with serial acquirers, they’ve got multiple different businesses and so they’re very resilient.

[00:05:22] Chris Mayer: At least the best of them are. And then so that’s those two combinations I think are very appealing. 

[00:05:27] Kyle Grieve: So I’d like to know what got you interested into the serial acquirer business model in the first place? 

[00:05:34] Chris Mayer: Good question. And I wish I knew more definitively. It was sort of in the midst of time a little bit, but I do know that it started with Constellation Software and I remember being skeptical of Constellation Software for years and years and years and just kind of thinking, how is this possible?

[00:05:48] Chris Mayer: How can this company acquire so many other businesses? And I remember thinking they must be a lot of junky businesses with low terminal value and, just being totally skeptical about it. But Then one day I did just sat down and read all of Mark Leonard’s letters and I just started to dig into it and figure it out and it, and it sort of clicked how this can work, there’s some parts of the constellation formula that other serial acquirers also follow, but there, there’s this decentralized model, how they run their businesses.

[00:06:17] Chris Mayer: So it’s not You have one guy in headquarters who’s buying hundreds of businesses, and in Constellation’s case, it’s almost like you have six different divisions all looking to acquire businesses. And then even within those divisions, there’s subdivisions that are able to do their own acquisitions.

[00:06:31] Chris Mayer: And there’s a certain discipline to it and formula to it. In Constellation’s case, they’re acquiring the same kind of businesses over and over. And so they have a, a way to create a box, a formula, what they’re looking for and just reapply it again and again. So when that started to click and I saw that work, I started to see kind of the patterns in other serial acquirers as well.

[00:06:52] Chris Mayer: That’s how I got interested in it and it just brought in from there. I, I got interested in Heiko, got interested in some of these others, and then discovered the Nordic serial acquirers in Sweden, and there’s plenty of those. That’s how it really began. 

[00:07:05] Kyle Grieve: And with your adventure into serial acquirers, did you discover them before or after you did your, your 100 Bagger study?

[00:07:13] Chris Mayer: Yeah, it was after. I mean, there were serial acquirers in the 100 Bagger study, but it wasn’t like, my brain said, Oh, these are serial acquirers. I just they were kind of an invisible category to me at the time. And if you had asked me then, actually in circa 2015 or so, I would have still been of the opinion that I didn’t want a company that was very acquisitive, there’s a general, as kind of, distrust maybe, or, about companies that are acquisitive, and I’m sure we’ll talk about that later, but that was something that I learned later, but there are a number of serial acquirers that are in that hundred bagger study, but I learned about it after.

[00:07:47] Chris Mayer: And I often say if I did an update or something that I think I would include a chapter on serial acquirers, they, they merit their own little study. 

[00:07:55] Kyle Grieve: So Scott Management had a great write up where they discussed subtypes of serial acquirers. They were roll ups such as Waste Management, accumulators like Constellation Software, platform like Danaher, and holdcos such as Berkshire Hathaway.

[00:08:09] Kyle Grieve: Do you categorize serial acquirers into subtypes? And if so, do you have a preference for a specific subtype? 

[00:08:15] Chris Mayer: I do not. I know I read that Scott piece, which is great. It was excellent. I guess I’ve studied too much of Alfred Korzybski and General Semantics to sweat too much over definitions and categories.

[00:08:24] Chris Mayer: So I tend to peek and peer right through those. And so for me, it really, it doesn’t really matter what kind of label you want to put on it. For me, it’s just focusing on the, on the business and The return on capital and reinvestment opportunities, the people involved, the balance sheet, and the sustainability of what they’re doing.

[00:08:40] Chris Mayer: And so whether it’s a, someone thinks of it as a platform company or a accumulator doesn’t so much matter to me. I’d say the ones I kind of prefer are ones where, they have a big market opportunity. I like the ones where there’s a more difficult sort of definable culture or where I really have great trust in the management team and the incentives.

[00:09:03] Chris Mayer: And they don’t depend too much on leverage and aren’t too aggressive. There’s kind of like a sweet middle path you, you kind of run with these things. You don’t want to be too aggressive, but you don’t want to be too laconic either. So there’s a, there’s a middle path there. And those are kind of the ones I favor.

[00:09:16] Chris Mayer: Not so much by what, not so much by category or type. 

[00:09:20] Kyle Grieve: And then one offshoot of that is the roll ups. So roll ups just to me seem a little more centralized. What’s your, what are your thoughts on roll ups compared to, a lot of the decentralized names that you have in your portfolio? 

[00:09:33] Chris Mayer: I prefer the decentralized model. It makes more sense to me about how that’s sustainable over a very long period of time. It seems to me that if you have a centralized process that can work when you’re smaller, but then there’s a point where it just becomes quite a burden on the HQ to keep that M&A machine going. I don’t know that we have so many examples of centralized models that work, that work really well.

[00:09:56] Chris Mayer: I mean, roll ups, when you say roll ups to an American investor, typically they’re going to view that negatively because there’s, lots of examples of roll ups that then went bust or blew up somehow or other. But yeah, I think I prefer the centralized model seems a little more resilient, seems easier to scale and grow and less risk as you do so.

[00:10:16] Kyle Grieve: So evaluating serial acquirers can be tough as their assets producing cash flows will obviously change as they acquire more and more businesses. So I’d love to know, what is your go to way of evaluating serial acquirers? 

[00:10:31] Chris Mayer: First, I think they still have to pass all the tests that any other business I would invest in would pass.

[00:10:36] Chris Mayer: And so I have some quirky things, that I look for my, we talked about balance sheet strength is something that. My tolerance for that is a lot lower than other people. My tolerance for leverage is a lot lower than other investors. It doesn’t mean that you can’t make a lot of money in a more leveraged vehicle.

[00:10:48] Chris Mayer: It’s just my own preference. And then I’ve talked about a lot, skin in the game, insider ownership is something that I, I look for. But again, there’s plenty of companies exceptions to that. Those are kind of filters I put on in general, but then when I’m starting specifically to look at a serial acquirer, there’s a lot of little things.

[00:11:03] Chris Mayer: I don’t like the ones that are super aggressive and buying up everything. An example is like Storskogen in Sweden. When it first came out, they were just, I mean, they had bought a ton of companies, I think over a three year period, something like 170 companies. It was a lot.

[00:11:20] Chris Mayer: They were very aggressive. They were buying everything and they weren’t particularly disciplined about what they were buying or paying all kinds of prices. And you just talk to people in Stockholm and they would, they would tell you that. So I like the ones that are much more disciplined, steady, I own Lifco.

[00:11:35] Chris Mayer: Lifco is a great example. They have definite, they have a certain model, a certain kind of business they’re looking for. And every year it’s just kind of steady. And that’s what I want, like steady, consistent, disciplined deployment of capital, not too much leverage. I look a lot at incentives.

[00:11:52] Chris Mayer: Those are some key ones. I think again, you have to consider the opportunity. So it’s, Lifco is a good one where they are, they own businesses across multiple countries. So you have a much bigger addressable market perhaps than than a So you require this confined to one industry or one geography.

[00:12:09] Chris Mayer: So those are things you have to consider. Yeah, I’m sure that there’s more things that will come up as we speak, but you know, those are some traits that I like. 

[00:12:17] Kyle Grieve: If you were to, let’s say someone was looking at Lifco right now and they wanted to figure out if the valuation right now was good, what would be kind of the metrics that you, you personally would use or you would suggest people use because serial acquirers, obviously, you can look at free cashflow, which is fine, but the thing with zero acquires is that if their free cashflow is zero, it just means they’re deploying all their cash. So that’s not necessarily a bad thing. So yeah, I’d love to know your, what you think on that. 

[00:12:43] Chris Mayer: That’s right. We want them to deploy their capital. So you really have to look at some sort of free cashflow metric before acquisitions to kind of get at what they’re doing.

[00:12:51] Chris Mayer: And then you want them to deploy that, but you know, you get to a good, you raise a good question there with kind of valuation because people struggle with that a lot and they’ll see something trading it. 26 times earnings or 30 times earnings, and they’ll think that it’s expensive. But you know, when you work out what the return on capital is of that business, and you, you, you can just look at something simple.

[00:13:12] Chris Mayer: You can look at ROE. And then you can look at how much they’re reinvesting every year. So if the ROE is, let’s say, 20 percent and they’re reinvesting 80 percent of that, paying out 20 percent of dividends, then you’ve got, 16 percent roughly in compounding. And then your question is, question for you is then, is that good enough for you as an investor?

[00:13:33] Chris Mayer: Is it, is it secure enough? Is it durable enough? Do you feel good enough about it that you’re willing to sit and wait? And there’s some sliding scale, you’re going to find some that, they’re doing 30% and maybe they’re doing, they’re paying out again, 20%. Now you’re looking at 24% kind of as you’re compounding and you have to, and that makes a big difference.

[00:13:52] Chris Mayer: So then when you think about it in terms of a decade out, you just sort of forecast what 24% compounded is over a 10 year period of time. It’s a big number. And then you put a multiple on that at the end of 10 years and compare it to today and get your IRR and you can see suddenly. If you have a company that’s going to increase earnings six, eight times over the next decade, suddenly, whether you pay 30 times earnings or 35, suddenly doesn’t seem that, that big of a deal.

[00:14:17] Chris Mayer: So you have to put it in that kind of perspective. So I always say, it’s business first, quality of business first. Spent a lot of time building that conviction on what it looks like on a 10 year view, having a great deal of confidence in that. And then, and again, that means digging into the economics of it, whether or not that’s sustainable.

[00:14:35] Chris Mayer: And then you figure out kind of what today’s price and what the IRR is. I mean, many of them are still cheap, even at 25 or 30 times earnings, if they’re successful in doing that. And so you can always, take a toehold position to start and then you get chances to add along the way, but you know, some, I always say to you, learn more when you own something than when you just follow it when you own it.

[00:14:56] Chris Mayer: And then you really start to see, the economics, I mean, really start to understand, what makes it go. That’s one way to get over that hurdle. 

[00:15:03] Kyle Grieve: I like how you break down to, it’s just a simple math equation, right? And like you just said, if you use ROE and book value. And if you have a good understanding of the sustainability of their return on equity, if they can keep it at that high level and they’re likely to just keep their reinvestment the same, then your evaluation is going to be somewhat accurate at the end of the day.

[00:15:23] Chris Mayer: And also, then you also can come to appreciate the differences between companies. So if you have a company, the high times people say to me why do you own X, why don’t you own Z? And it’s what I own is trading at 30 times. And what they’re suggesting is seems very similar, but it’s trading at 20 times.

[00:15:37] Chris Mayer: But then when you look at the return on capital and the reinvestment rate, you see that difference. And when you cast it over 10 years, it’s an enormous difference. And so the market’s not entirely dumb. It’s, it has settled, it has figured out that the one of these is not going to create as much value as the other.

[00:15:51] Chris Mayer: And so I see that all the time. People trying to go with the lower multiple name thinking it’s cheaper and it’s very similar. But when you look at it, the, the higher return business is quite a bit better. Even three, four or five percentage points matter a lot, as over a decade.

[00:16:05] Kyle Grieve: It’s no secret that most mergers and acquisitions is value accretive for the seller and not the acquirer, and yet the institutional imperative of growth keeps businesses in hot pursuit of M&A, even when the research suggests that it is mostly a losing proposition. What do you think are the key attributes from successful serial acquirers that allow them to buck this trend?

[00:16:25] Chris Mayer: And I think you’ve read this book as well, Deals from Hell. You know about that book. Yeah, because I think he pushes back on that and says, actually, M&A is not value destructive in general. It’s, it is. It’s just that there are, the failures are so high profile, but he has some interesting things about that in that book, but I would say, sticking for a minute to the serial acquirers, smaller deals, I hate this word programmatic, but people use it, where it’s more of a routine acquisition that fits into a certain box that that company’s looking for.

[00:16:52] Chris Mayer: Those tend to create value. The ones that hurt are over their big splashy acquisitions. There’s a lot of leverage involved. If it’s something that’s outside of management circle of competence, I mean, you have, if you have a serial acquired, it’s accumulating industrial, industrial businesses. And then all of a sudden they buy, a retail chain or something like that.

[00:17:10] Chris Mayer: That could be a risk. So what makes them buck that general trend of having these failures is that they are smaller. They’re more routine. They fit into what those businesses do, what they know about, it’s a decentralized model that we talked about. Those are important factors. I’m sure I’m missing something there, but that’s the sum of it.

[00:17:28] Kyle Grieve: Speaking of Deals from Hell. In that book, the author Robert Bruner outlines some of the biggest M&A failures happen, like what you just said, when acquirers purchase in hot markets and at poor prices. So many of the best seller acquirers purchase businesses on private and not public markets, which can help take away a little bit of that risk.

[00:17:46] Kyle Grieve: So how do you think that gives them an advantage over, 

[00:17:49] Chris Mayer: Yeah, that’s a good point. That’s a big one too. I mean, the companies that are acquiring other public companies, much more difficult than acquiring private companies. So for one thing, a lot of the private companies, I mean, they’re just the multiples or what they’re paying is a lot less, it’s, it is a lot less.

[00:18:03] Chris Mayer: I mean, that’s, that’s a big factor and, some of the best serial acquirers, they are really, they’re not necessarily, I own Teqnion, for example. And they’re not necessarily just buying from brokers. They’re doing their own work as far as trying to dig up candidates, they’re on the phone calling companies, meeting with them.

[00:18:21] Chris Mayer: And it can be years before they actually acquire that company. There’s this long kind of relationship building period. And that, that has a lot of appeal to me, the companies that can do, that can do that. Cause then they’re really thinking about things like culture and good fit. And they’re really giving a lot of thought to what they buy.

[00:18:38] Chris Mayer: Versus misquire is where it’s more of a financially motivated transaction or financial engineered transaction where you’re just buying companies that are private because they’re lower multiple and you’re in a public vehicle at a higher multiple. And so you kind of just take advantage of this arbitrage.

[00:18:52] Chris Mayer: So I think that, buying companies privately, yeah, you avoid that sort of auction platform, although that certainly it can and private markets can get hot. You’re still a lot cheaper than public markets, so you avoid that, that sort of bidding war that gets, that can happen on a public platform.

[00:19:10] Kyle Grieve: Another big takeaway from Robert Bruner’s book is that the quote, Best deals seem to be improvements of the target company rather than improvements of the buyer. Buyers go into the best deals as healthy, performing firms seeking to spread their best practices to the targets. The worst deals show buyers who perform poorer than targets leading up to the deal.

[00:19:30] Kyle Grieve: So have you found the statement to be pretty accurate from your observations and research on multibaggers and serial acquirers? 

[00:19:37] Chris Mayer: Yeah, I think so. I think the companies that are doing the acquisition, they bring us bring a set of best practices to the, to what they acquire. Certainly Constellation is a great example of, bringing best practices to companies they acquire.

[00:19:49] Chris Mayer: There’s a certain playbook that they have. And one part of that is simply increasing prices or what they call value based pricing. They don’t spend a lot of money improving a product unless there’s a, unless the customer is willing to pay for that. So it’s just a simple matter of making sure they get paid for the work they put in.

[00:20:05] Chris Mayer: And I find in other serial acquirers as well, they, they can help with like Teqnion, they can help with the human resource function, especially help them find people and they can take that load off of CEO running that company and managing team running that company. Other serial acquirers, they can help with working capital management and other issues.

[00:20:22] Chris Mayer: So there, there, there is some value add that, that a serial acquirer can bring to the companies they acquire. So I would say, yeah, that’s generally true. Another way you see it is that over time the margins of companies for, again, for the better, better serial acquirers, the margins of the companies they acquire tend to improve over time.

[00:20:39] Chris Mayer: So that’s an example that they’re getting better and getting, being better, better businesses. In some cases, like with Lifco, they’ve, you can go back and you can look and I believe they’ve disclosed this, like you can look at a division, a company they acquired years ago called Brock and you can see 20 years ago what it did in revenue and you can see what it does now.

[00:20:58] Chris Mayer: It’s 20 times as large. So it’s a case where they’ve helped businesses grow and get better over time. I like that aspect of it. 

[00:21:06] Kyle Grieve: And Brunner, I remember in the same book, he said a lot of the best acquisitions came from a position of strength rather than from a position of weakness. And, it seems like a lot of these bad acquisitions come where the company is going in and they’re not doing so well.

[00:21:20] Kyle Grieve: And then they have to make this acquisition to try to garner interest from investors. 

[00:21:25] Chris Mayer: Yes, that’s a good point. I mean, I think the serial acquirers, I don’t think there are too many that do this where they’re actively just taking around, taking on a turnaround. I guess Constellation is good at that, and they’re buying companies that are not generally, sometimes not necessarily performing that well, and they come in and improve it, but for a lot of the other industrial serial acquirers, they’re not doing that, and I think they’ve learned how difficult that is, to do the turnarounds.

[00:21:49] Chris Mayer: It’s like Buffett says, most turnarounds don’t turn. That’s the problem. 

[00:21:52] Kyle Grieve: So now that we know some of the attributes of successful serial acquirers, let’s get into what exactly makes a good acquisition. What are the characteristics that the acquirer should look for in the businesses that they are acquiring so the acquisition will be value creative to the shareholder?

[00:22:07] Chris Mayer: This is where it’s, it’s a, there’s a lot of different ways to do it. And so all the different serial acquirers have their different targets. They all, almost all of them that I’ve seen have some sort of say target margin that they’re looking for, or they’ll talk about sales growth. They’ll even talk about.

[00:22:22] Chris Mayer: Minimum size. So I don’t know that there’s a real definitive answer there cause there’s a lot of ways you can do it. You can do it with higher margin businesses. You can do it with lower margin businesses. You can do it with capital light. Most of them are trying to be capital light. So you’re talking about businesses that don’t require a great deal of reinvestment capital expenditures just to keep going.

[00:22:40] Chris Mayer: That’s another attribute tends to be. What I like is also when the serial acquirers do the deals without issuing shares. I don’t like the ones that are issuing a lot of shares to fuel their acquisition. That’s kind of a, maybe more of a red flag where they use a lot of leverage. Most of them are, if you’re talking about say, debt to EBITDA two and a half times or less, and they can float around a lot and can vary a little bit on the industry.

[00:23:03] Chris Mayer: Brown & Brown is one I own. Every time they do a big deal, you’ll see their kind of net leverage kind of swells a little. Like they just bought last year, they bought GRP in the UK. So their leverage is going to swell up a little, but then come down in 2018, they bought Hayes, which was the largest acquisition they did at that point.

[00:23:18] Chris Mayer: And the same thing, you could see their leverage pop up a little and then kind of come down, Heiko just bought Wincor. And so they’re going to have, and their leverage is going to pop up. But I’m talking about when you’re looking at the company over a longer period of time, what’s kind of normal leverage.

[00:23:30] Chris Mayer: For me, in less than two times, debt to EBITDA is a good number, and I think most of them have some kind of targets like that. So where they get in trouble is, issuing shares, leverage, doing too many deals, and not being disciplined about what they pay. Those are kind of where they screw up. 

[00:23:46] Kyle Grieve: How about synergies?

[00:23:48] Kyle Grieve: Do you actually like businesses that will, are synergistic with the acquired business, or do you like the ones that it doesn’t really matter that much? 

[00:23:57] Chris Mayer: Yeah, I like the ones where it doesn’t really matter that much. I mean, in my experience, true synergies are kind of hard to find, really. It’s a number that gets thrown around a lot.

[00:24:04] Chris Mayer: People talk about a number. It’s a word that gets thrown around a lot. Managing teams like to talk about synergies, but real synergies are kind of hard to find when they happen. Great. It’s wonderful, but I prefer that it not, that the deal not depend on that, not depend on synergies. 

[00:24:20] Kyle Grieve: And what about aligning incentives between the acquired and the acquiree?

[00:24:24] Kyle Grieve: What are your favorite models for that to look for? 

[00:24:28] Chris Mayer: This is a great question because this is one area where they’re different. So some serial acquirers will buy out 100 percent and just use some kind of earn out structure. That works, and lots of companies use that. Teqnion uses earn out, Brown & Brown uses earn outs.

[00:24:42] Chris Mayer: And then there’s the other model more where they might, they don’t buy 100 percent of what they’re buying. They buy 70 or 80 percent and they leave the management team in with some skin in the game. That’s like the HYCO model. They do that and that works very well too. At LIFCO most of the time they’re buying at everything, although they have had some deals where they don’t buy out the whole.

[00:25:00] Chris Mayer: I don’t know that I have a preference one way or the other, just that, different models and management teams make different ones work. They both can work very well, and I’ve owned companies that do it both ways. So I think, again, this is one of those that falls more along the lines of maybe personal preference, but also Whether that particular serial acquire is successful with whatever method it’s chosen, you could, we could sit here and imagine ways in which, earnouts could fail.

[00:25:23] Chris Mayer: Somebody not do it well or the other way. You, you take a 70 percent of the management team and you think you’ve got them interested with 30%, but they’re not. Now, what do you got? Now you’ve got a problematic partner that owns 30 percent of the equity. So both can fail and both can work. 

[00:25:39] Kyle Grieve: So this might also be personal preference, but what about management?

[00:25:43] Kyle Grieve: So once an acquirer acquires the business, do you prefer management stay in place, or do you like when they just buy the business and then can find their own management afterwards? 

[00:25:52] Chris Mayer: It feels better when the managing team stays. I know that that, I would prefer that that not be a requirement. For example, I remember talking to Per, the CEO at Lifco, and he told me, they underwrite every deal as if the management team walked away right after, because that’s kind of the worst thing that happens.

[00:26:07] Chris Mayer: You have to think that can you run the business? Do you have people and all that? So I think that’s a good way to approach it, but it feels better to have the existing management team run it at least for a couple of years. I don’t expect them to stay there forever. This is how the opportunity is created.

[00:26:20] Chris Mayer: Why is Teqnion able to buy some of these nice businesses? It was because of people own them, started them, ran them for 20 or 30 years, want to retire. So you can’t expect to buy that and then have that person stick around for 10 years. It’s just not the way it’s going to work. 

[00:26:34] Kyle Grieve: So a common problem, any serial acquirers face as they scale is a problem of growth.

[00:26:38] Kyle Grieve: When you’re a smaller, a small acquisition can still move the needle. But as you grow cash flows, you find larger businesses that you have to reinvest your cash into. The theory is that as these deals get larger in size, it becomes harder to apply your strict acquisition criteria to larger acquisitions.

[00:26:55] Kyle Grieve: I’d like to get your thoughts on how some of the larger serial acquirers like Constellation Software are going to be able to sustain their high returns on capital while doing deals in, say, the sub 700 million range. 

[00:27:05] Chris Mayer: Yeah, I mean, I think this is a big, the big concern with serial acquirers is as they scale, it gets more challenging.

[00:27:12] Chris Mayer: And like a lot of the Swedish serial acquirers, like in Indutrade or Lagercrantz, as they got bigger, they just, they did bigger deal. It’s not, not necessarily they did more, they just did bigger. So that’s interesting. And then you do see a certain fade over time. As you, as you get larger, the return on capital starts to kind of tail off and as you would expect, but you can still create a lot of value.

[00:27:38] Chris Mayer: If you’re starting, let’s say constellation started at 30, 35 percent return on invested capital, and it’s got a lot of room to come down and still create value if they’re putting large amounts of capital to work. So it’s both things that you want returns and the amount of capital you can put into work.

[00:27:52] Chris Mayer: But yeah, Constellation is a really interesting case, and I own it, and it’s always the question when I talk to other shareholders. It’s the thing we talk about. It’s, what does Constellation 2. 0 sort of look like? What are they, how can they continue to do what they’re doing? How sustainable is it?

[00:28:05] Chris Mayer: What does it look like? I think we’re getting a peek at it. I mean, they did the deal where they bought what was it? Blue Optima from Black Knight, which was an incredibly good deal for them. And before that, they did the All Scripts deal, which was a very large deal. Jury’s still out on how exactly that deal is coming out.

[00:28:22] Chris Mayer: But yeah, it will remain to be seen with Constellation, whether they can continue to do it or not. And they’re still doing, some of the smallest acquisitions too. So it’s funny to have a company that market cap and they’re still doing these little tiny, tiny deals. And based on research that I’ve done, that I’ve talked to people in that business, I mean, there’s still, they have a hundred thousand plus targets that they track and not all of those are actionable, of course, but there still seems to be, and there’s more copycats and everything.

[00:28:49] Chris Mayer: So there still seems to be a lot of opportunity and we just have to wait and see, but this is the, this is the big concern with serial acquirers. And once they get that big, it gets harder and harder to find ways to deploy that capital larger and larger sums, but it can be done. I mean, I remember people talking about Berkshire Hathaway and how, it was too big 30 years ago.

[00:29:09] Chris Mayer: And still had a lot of legs left and look at Constellations is tiny compared to that. So they’re among the best corporate capital allocators on the planet. So if you, if you want someone, if you wanted to pick someone to solve that problem, you would, you would pick them, I think. So I feel good that they’re going to figure it out.

[00:29:25] Chris Mayer: We’ll see. 

[00:29:27] Kyle Grieve: And you would know much better about these deals than I would. Are they basically still applying their same acquisition criteria to small deals, just to larger deals? Or what differences are you seeing? 

[00:29:38] Chris Mayer: As they go up, the IRR hurdle comes down. There’s a sliding scale. They’re a smaller deal.

[00:29:43] Chris Mayer: Let’s just say, I don’t remember the numbers offhand, but let’s say it’s 30%, return required on, on a deals, the smallest deals. And as you step up on revenue, that, that hurdle rate comes down. So they, they acknowledge the reality of that. You’re not going to be able to put together big sums of capital at the same IRR that you can Hoover up these tiny, tiny VMS businesses.


[00:30:02] Kyle Grieve: From my research on serial acquirers, a general observation I’ve made is that organic growth rates tend to go down as the business scales up. How do you incorporate organic growth rates into your analytical process? 

[00:30:15] Chris Mayer: Yeah, I mean, I focus more on total growth. And I don’t want organic growth to be negative.

[00:30:18] Chris Mayer: So there you go. Constellations has been very successful with organic growth rates of low single digits. So I think it’s nice to have high organic growth rates. Of course, it makes everything work better. It makes the model work better, but you don’t have to have it. Total growth is more important.

[00:30:32] Chris Mayer: And then secondarily, you want that organic growth to at least be kind of positive. I think the market does tend to punish companies that have negative organic growth. And I think organic growth is interesting to keep an eye on anyway, because it, it’s kind of like a clue as to how management or how much attention is paid to a business once it’s acquired.

[00:30:52] Chris Mayer: So it’s kind of like, if the management team does pay attention to the businesses after they acquire them, you tend to see better growth rates. They’re just, it reflects more of the attention paid there. I think, I mean, as a generalization, I think that’s probably a good indication that, Organic growth is a, is a kind of an outcome of paying attention to how the businesses are managed once you acquire them.

[00:31:14] Kyle Grieve: And from your research on serial acquirers, are you aware of management incentivization programs that are looking for organic growth? I know Topicus, I think Dayan, who was the former CEO, he incentivized to get organic growth, but Do you see that in other companies as well? 

[00:31:30] Chris Mayer: No, no, I have not. A lot of times targets are based on EBITDA or some version of that.

[00:31:38] Chris Mayer: It’s interesting. Not, not as many even have a per share component. Teqnion does, they have earnings per share. Double every five years is their goal. I think there’s another serial, I think Volati I remember seeing has a per share, actually has a per share requirement for something. So there, there are some out there like that, but I don’t recall seeing specifically organic growth being called out.

[00:31:58] Chris Mayer: That may be, part of the incentives for those, for the individual subsidiaries. We just don’t see it necessarily as investors at our level. 

[00:32:05] Kyle Grieve: So financing mergers and acquisitions is very important to successful deals. Most deals are financed by cash, bank debt, or the issuance of equity. Cash is probably the best source of financing as it carries the least amount of risk, but many great zero acquirers have more ideas than they have cash on their balance sheets.

[00:32:22] Kyle Grieve: If they can maintain their acquisition criteria, then leveraging with debt or equity can be the right move. What method of financing do you find the most valuable for the acquirer? 

[00:32:31] Chris Mayer: The best are the ones that are able to finance their acquisition program entirely with their own cash flow, their own operating cash flow.

[00:32:38] Chris Mayer: And so just as operating cash flow comes in, they reinvest it and operating cash flow grows over time and they’re reinvesting it. That’s a beautiful thing. Some leverage in there I think is, is good. Some small amount of leverage, juices and returns a little bit without any, without really any risk.

[00:32:53] Chris Mayer: I’m okay with that. And you just, like we talked about before, the excessive leverage, you can get into trouble. And I don’t like issuing shares so much either, just because that’s a very, very extensive, expensive way to buy things. You always, I always think about Warren Buffett talking about his Dexter shoe or he issued shares to buy it.

[00:33:09] Chris Mayer: And, and he tells us about how expensive it is. and later years. And so I think of that too, I think I look at the shares as precious. And what are they going to be worth 10 years from now? And then how expensive is that acquisition going to really look? So I would hesitate to issue shares.

[00:33:23] Chris Mayer: Even when the shares appeared to be pretty rich, I would still even be reluctant then. I would try to do it any other way before I issued shares. 

[00:33:32] Kyle Grieve: Yeah, I ran the numbers on that actually just like a few days ago and the shares that he issued were worth 12 billion. So yeah, going back, you, you previously mentioned debt to EBITDA that you kind of liked around or sorry yeah, two and a half times or so.

[00:33:46] Kyle Grieve: Is that kind of a general number that you like to stay below for some of these acts? 

[00:33:51] Chris Mayer: Yeah. General number. I mean, most of the company I have are leveraged well below that or one point something. But then again, I, they sort of flex like an accordion if they happen to do a bigger deal and I’m okay with that.

[00:34:01] Chris Mayer: I want them to do it, do those deals when they can. I mean, I, it was great that Heiko bought one core, I think, and bought the number two. player in PMA. And so that should be a good transaction. I thought it was great when Brown & Brown bought GRP gives them a substantial foothold in UK and grow that business.

[00:34:17] Chris Mayer: So I’m okay with that. And I know the management teams will, will bring that leverage back down in a couple of years. It will be back down below those well below that two 2. 0 target or whatever. 

[00:34:29] Kyle Grieve: And do some of those businesses that are using debt as leverage, do they ever find trouble getting access to debt?

[00:34:35] Kyle Grieve: Right now, obviously, interest rates are high and debtors aren’t exactly running out to find people to give money to. Is that a problem or is it just the fact that they have such good operating results in the past that it’s easy for them and good relationships, it’s easy for them to get that debt?

[00:34:49] Chris Mayer: Yeah, I would say more of the latter. For the ones I’m involved in, it’s been, it’s easy. leveraged. They generate a lot of cash. And they have a track record. So yeah, I would say it’s been easy, but you know, I, I always say, I remember, 2008 crisis when, where there are lots of companies that had, you thought were decent balance sheets.

[00:35:07] Chris Mayer: And then suddenly when credit dried up, even decent balance sheets became problematic. So scars from that made me very picky about balance sheets. And, and that’s partly why I am the way I am. And I try to avoid that leverage. So the ones I’m involved in, it’s really not, not a problem. 

[00:35:23] Kyle Grieve: So you mentioned just previously that you don’t really like businesses that are issuing equity for acquisitions.

[00:35:30] Kyle Grieve: Are there any times that you would make a exception for businesses that do that? Or is it kind of just, if they have a history of doing that, you’re basically just completely red flagging it and you’re out. 

[00:35:41] Chris Mayer: I have to have a history of doing it. Yeah, I’m probably not, I’m not going to be very interested in that.

[00:35:45] Chris Mayer: But there are cases where it can make sense. Teqnion recently did a small raise, for example, just to kind of bridge, because they had such a robust pipeline, they were a little concerned that they might have some of these things all come back and they wouldn’t be able to, necessarily make good on all of them.

[00:35:59] Chris Mayer: It was just some money to get just a little bridge to get them across, and I don’t really expect them to issue equity again. So I think there can be certain circumstances like that where it may make sense, Heiko issued a sliver of tiny sliver of shares when they did the Wencore deal. I don’t know if it made sense necessarily or not, but you know, for an asset like that, if the other side is demanding shares, then it might make, might make sense to get a really a premium asset.

[00:36:24] Chris Mayer: But, this is again, more my personal preference because I know there are some serial acquirers that have been reasonably successful and share issuance is a regular part of what they do. But. I don’t like that also because if you become dependent on that, you may find that you have to issue shares at a time where it’s not so convenient, markets are not always so buoyant and friendly.

[00:36:43] Chris Mayer: So if you make that a regular part of your plan, and then we go through a period of time where share prices are, are low, and it’s going to mess up your little algorithm. 

[00:36:52] Kyle Grieve: So European serial acquirers seem to be doing a lot of things right. Since you have Topicus, in your portfolio, I think that you might have some insights into their special sauce.

[00:37:01] Kyle Grieve: What is it about European and specifically Nordic countries that seem to be producing many high quality cereal acquirers? 

[00:37:08] Chris Mayer: It’s a good question. With Sweden, there’s a whole bunch of them over there, as why is that? I remember when I, went there, actually, both times when I’ve been and I’ve talked to people, I usually like to ask this question.

[00:37:17] Chris Mayer: I don’t know if I ask anymore, but I did for a while because I was trying to figure out what’s the deal? Why are there so many of these things over here? And I got several different answers. I don’t know that any one of them is right, but there may be some truth in all of them. I mean, I can just share some of them with you and see, one of them is that there’s just there’s this more of a sense of trust within Sweden, just among Swedish people.

[00:37:38] Chris Mayer: And so it makes that decentralized model more workable. And so it’s more of a natural thing to happen there. And the other is, you did have Bergman & Beving started the first kind of Swedish serial acquire was very successful and had spinoffs, ad tech, Lagercrons and so forth. And then naturally there were companies that sprouted up in Stockholm to copy that.

[00:37:57] Chris Mayer: So it’s kind of like maybe when you call like a Silicon Valley effect, I think of it as. You just happen to have tech companies all start there and then they, there’s other ones that just start around it. And before you know it, it becomes a hub. And so that Stockholm’s become kind of the hub for that.

[00:38:10] Chris Mayer: Might also be part of it is that I’ve heard that part of it may be also that Swedish law is, it’s really easy to acquire companies there. You could have a, your documents might be 10 or 12 pages just to acquire a company in Sweden. You go to the UK, there’s lots of lawyers involved and it’s hundreds of pages or the U.

[00:38:27] Chris Mayer: S. So there’s, there’s something, there might be something that, so a combination of all these factors led to this proliferation of serial acquirers in Sweden, so yeah, that may be one reason why. 

[00:38:40] Kyle Grieve: So one thing that stood out to me when I’ve been looking at documentation of many great European businesses is the transparency in insider ownership compared to many North American documentation.

[00:38:49] Kyle Grieve: Why do you think their levels of transparency in that department are so much greater than in North America and other geographies?

[00:38:57] Chris Mayer: I don’t know. Some of it is, there’s more family owned businesses over there. And so they naturally disclose those things. But otherwise, I really don’t know why that is.

[00:39:06] Kyle Grieve: So in a presentation by Johan Steen of Teqnion, he had a great section where he discussed the importance of adjusting as a business scales. For instance, managing 50 subsidiaries down the road will be a lot different than managing the 26 that they have right now. What are some of the key personnel adjustments that you’ve noticed must be made as a serial acquirer grows successfully?

[00:39:28] Chris Mayer: Yes, this is a question I talked to many of them about, and Teqnion’s answer is refreshingly honest. They’ll just, they say they don’t know, and they’ll see, when they, when they get there. For, for now, it’s Daniel and Yuan, and they can handle it for, I’d say, probably at least five more years before maybe more before it becomes an issue for them, because they’re pretty small.

[00:39:45] Chris Mayer: But I’ve talked to Perry Lifko about this and the big change is you have to find more people that can be involved in cap in the capital allocation role. And that’s difficult, like to find good operators, people know businesses and can run businesses. That’s easier. But then to find those people who then also are good capital allocators, that’s harder to find, or you have to kind of grow your own.

[00:40:08] Chris Mayer: So that I’d say is the big change. You have to bring along other capital allocators within your organization so that it can’t just be, one guy doing the whole thing or two guys running, two people running the whole thing. You have, you have others involved. I think that’s the big, the biggest one, biggest change.

[00:40:26] Kyle Grieve: And so for a business such as Constellation Software, which has tons of people making these decisions. How have they created, I guess, a model or education system that is doing such a good job of this and, how can 

[00:40:37] Kyle Grieve: other companies use it? 

[00:40:39] Chris Mayer: I think for them, they’re, because they’re, they’re buying the same kind of businesses across all those different silos.

[00:40:45] Chris Mayer: VMS, vertical market software businesses, they, they know there’s certain. They know what SG& A should be. They know what sales and marketing should be. They know all the different costs and what they should be, and they can apply that template across all their acquisitions. Maybe not all now because now they’re doing other things as we talked about, but the old bread and butter anyway, whereas somebody like a Lifco or Swedish industrial acquirer can’t use a model like that because they’re acquiring businesses in different industries.

[00:41:12] Chris Mayer: So it’s kind of like there’s pros and cons to it. And on the one hand, you could argue and say somebody like a Lifco has a much greater TAM than, than Constellation. There’s not any restraint there. So they’re not confined just to vertical market software. But then the downside is they don’t have, they can’t just have one template and train people to look for these things.

[00:41:33] Chris Mayer: They have to have someone who’s a little more balanced or, those, businesses. And can, can value and acquire a lot of different kinds of businesses. That’s kind of the, the tug between having a serial acquirer that’s in one industry and they can have one model that they just apply over and over versus someone who can acquire across different industries.

[00:41:53] Chris Mayer: Both can work. 

[00:41:56] Kyle Grieve: And so let’s invert. What are some personnel red flags to be aware of when coming, when it comes to serial acquirers in regards, especially to scaling up? 

[00:42:05] Chris Mayer: I mean, there’s a lot of turnover. That’s always a red flag. I want to know why that is. The other thing is you can sort of watch the returns on the businesses.

[00:42:13] Chris Mayer: If you have returns that are declining, that can be an indication something’s not right. Even though management’s saying that things are okay, if you’re seeing it in numbers, things seem to be deteriorating that could be an indication there’s some kind of problem with their, they’re having some problem scaling that needs to be figured out.

[00:42:31] Chris Mayer: So those are a couple that I think of offhand. But you know, on the outside, it’s not necessarily always so easy. This is why you really got to have confidence in management team and their process and have great confidence they can do it. 

[00:42:44] Kyle Grieve: So let’s turn our focus to the competitive advantages that serial acquirers possess.

[00:42:49] Kyle Grieve: M&A isn’t a new business model, but as businesses like Bergman & Beving, Lifco, and Constellation have shown, it is possible to shine brighter than competition in public and private markets. How have some of these businesses been able to continue doing what they do for decades while the majority seem to fail?

[00:43:04] Chris Mayer: I mean, some of it is that they’re permanent owners of these businesses. I think that’s an advantage, particularly over private equity buyers and other acquirers of companies that aren’t necessarily going to be permanent owners of that business, but are maybe looking to eventually flip it for profit. I So that’s one advantage.

[00:43:21] Chris Mayer: Some of it is the model itself. So it’s, I remember struggling with this in the beginning too, like what’s the competitive advantage of Swedish Cereal Acquire Holdco? And it isn’t necessarily obvious at the Holdco level. Or think about something like Brown & Brown is an insurance broker. There’s other insurance brokers.

[00:43:37] Chris Mayer: They all do the same kind of similar things. And but once Brown & Brown gets a customer, And then, it’s like a 95 percent renewal rate. And it’s this, it creates this cash annuity, almost like a, like a software company. So yeah, they fight heck to get the business, but once they get it, they keep it.

[00:43:53] Chris Mayer: And that’s kind of true in the industry generally. So that was, that’s what makes it attractive. And I think with this other serial acquirers, the Swedish serial acquirers, the industrial Swedish serial acquirers, It’s similar. They’re owning. Once they have the business, then they have it. And a lot of these businesses are small niches.

[00:44:09] Chris Mayer: They do little, they do things that aren’t necessarily so easy to compete with at that level. So it’s not that the competitive advantage is necessarily the whole income level, but it’s in the companies that they own. It can be at the whole level too. I mean, there are cultural things that are hard to copy and there are approaches that are hard to copy.

[00:44:26] Chris Mayer: But I think a lot of it comes down to the businesses that they’re investing in. 

[00:44:31] Kyle Grieve: Venture capital and private equity are obviously competitors in the M&A space. What structural disadvantages does venture capital and private equity have versus public competitors like these Swedish serial acquirers? 

[00:44:43] Chris Mayer: I think the big disadvantage, which we just talked about a little bit, was that they, they’re not buying for keeps.

[00:44:48] Chris Mayer: And so that can matter. I mean, when you’re looking to buy, if an entrepreneur is looking to sell his business. Yes, there’s a certain group of entrepreneurs who are just going to take the highest bid and they don’t care. And in those cases, VCs and private equity and all those, they’ll probably win those deals.

[00:45:03] Chris Mayer: But for some of them, where they’re really concerned about the legacy they leave and they’re concerned about the employees and they want their business to continue. That’s where something like a Teqnion or a Lifco would be a more valuable home, would be a better home for that business. So it really depends on the kinds of businesses.

[00:45:18] Chris Mayer: And certain businesses are not necessarily going to be that interesting to VCs anyway. They’re going to go after companies that have really high organic growth, big markets, whereas Teqnion and Lifco can buy just some small, modest business that may not be, it may be growing 5 percent a year or whatever but that would be perfectly good, perfectly good fit.

[00:45:37] Chris Mayer: Otherwise for those acquirers. So kind of depends a little bit, but the other thing is that serial acquirers, we may see this now because with interest rates A lot higher than they were a year ago. I’m very interested to see how the private equity buyers, what happens to that pool of money?

[00:45:54] Chris Mayer: Is it, is there less competition now for purchasing companies because they depend heavily on cheap debt? And some of the serial acquirers themselves have used a lot of leverage. They’re going to be challenged to their model depend. If their model depended more on having access to low cost debt, then that model is going to be challenged now too.

[00:46:12] Chris Mayer: We should see that. And then I’ll also be curious to see if higher rates have an impact on the prices of the businesses themselves, whether they come down a little or not. We’ll see. 

[00:46:22] Kyle Grieve: And then looking at the other side, where would VC and private equity have advantages over some of these serial acquirers?

[00:46:30] Chris Mayer: They have definitely have an advantage over any situation where the money talks above everything else. Cause they’re going to write the big, they’re going to be able to write the biggest check and this, the serial acquirers are going to be disciplined about what they pay and they’re not going to get involved in those.

[00:46:42] Chris Mayer: So any kind of, high growth, sexy company involved in anything like, anything like that, those companies have the advantage. 

[00:46:50] Kyle Grieve: So a popular question I come across on Twitter is what makes one Serial acquirer better than another? And you kind of just touched a little bit on this, but we can get into a little more detail.

[00:46:58] Kyle Grieve: So since many of the businesses seem to be running similar playbooks, it can be hard to differentiate which one deserves your capital over another. What do you think differentiates some of your businesses, such as a Lifco or over an Adtech or Topicus over Vitek? 

[00:47:12] Chris Mayer: One is the, it’s the people involved and there are some differences in strategy, whether you are okay with it or not.

[00:47:19] Chris Mayer: So Vitek is an interesting one that they have issued shares in the past and you’re either okay with that or you aren’t and their targets are a little different. I think Vitek has higher organic growth rates generally than Constellation. So they’re going after slightly different companies there. So I don’t know.

[00:47:34] Chris Mayer: I mean, it’s, you have to, there’s a lot of little particulars that kind of add up and makes them different, makes one serial acquirer different from another. And you just have to sort of compare them all from top to bottom and how they’re, because I know, I know what you’re getting at and it’s popular with people who haven’t done a lot of work in it and then they’ll say, why is this one, why is this one better than that one?

[00:47:54] Chris Mayer: Basically what you’re asking. And, and it seems like it just opens the door to so much, you have to talk about so many different things. It’s not so obvious that you can just jump out and say they do this and these guys do that. It’s a lot of little things. And yeah, I guess the people, incentives, the kinds of companies are business, how kinds of businesses they are acquiring, how disciplined they are about it, how they finance them, a lot of decisions and a lot of ways to do it.

[00:48:17] Chris Mayer: And so you have to find the ones that have the good recipes, but sometimes there can be subtle differences. 

[00:48:24] Kyle Grieve: I agree. And the common answers I usually give are cultural. And you’ve, you’ve instilled that in me a lot just from reading a lot of your stuff. But, culture matters a lot. And especially if you’re running these decentralized models, because you’re essentially when you buy them, you’re entrusting that the culture that you’re buying Is going to be just as good or hopefully maybe even better than the culture that you have now.

[00:48:43] Kyle Grieve: So I think a lot of businesses just they can’t do that. 

[00:48:47] Chris Mayer: I agree. And also, the culture matters if you’re a long term holder. I mean, if you’re going to own this business, you’re thinking of owning the business for a decade, then that becomes very important. If you’re just looking to buy something for a year, Because the P.

[00:48:58] Chris Mayer: E. is lower than it’s been over the last five years and you’re playing, some, that’s different and you don’t care too much about the culture, but you’re going to own it for a very long time. Then these things really matter and they can have a great impact on return over a decade. 

[00:49:11] Kyle Grieve: Absolutely. So many of the best serial acquirers maintain levels of returns on capital that most business owners can only dream of.

[00:49:17] Kyle Grieve: What is it about the acquisition criteria of many of the best serial acquirers that allows them to maintain such high levels of capital efficiency? 

[00:49:25] Chris Mayer: I mean, some of it is that they’re paying a good price, so that helps their returns right off the bat. And two, they’re usually buying things that, where they feel like they can at least grow the business or increase margins over time, so that’s going to help their returns as well.

[00:49:39] Chris Mayer: And staying with businesses that are occupying certain niches where there’s perhaps less competition and they can envision what the company might look like five, ten years down the road. Those are all important considerations. And yeah, I think those are the, those are some key ones. 

[00:49:57] Kyle Grieve: So as a long term investor, your intent is to hold on to your businesses for a long time.

[00:50:02] Kyle Grieve: So on a quarterly and yearly basis, how are you monitoring serial acquirers to ensure that they continue performing at high levels? 

[00:50:10] Chris Mayer: You always track the acquisitions, how that’s going. Although you don’t worry too much about quarters can be light. And then sometimes a company might go two quarters, but hardly making any acquisitions.

[00:50:19] Chris Mayer: And then boom, boom, they make, two right away. So you want to see that they’re consistently deploying capital, that’s a big one, and otherwise that they’re doing what they, what they say, and the underlying health of their businesses is still good, so you still follow it just like you would any other company.

[00:50:35] Chris Mayer: I think the only added wrinkle is, yeah, in this case you want them to spend that, spend capital acquiring new businesses. I don’t know if there’s any other specific KPIs I follow there. I mean, different businesses have different KPIs. So a constellation, of course, you’re always looking at organic growth and seeing how that shapes out.

[00:50:52] Chris Mayer: That’s kind of an important number. And that’s the same with Brown & Brown, almost all of them, you’re kind of looking at organic growth as well and how, how they are deploying their capital. Those are kind of the two big ones. 

[00:51:03] Kyle Grieve: Chris, thank you so much for joining me today. Before we say goodbye, where can the audience connect with you, your fund, and your books?

[00:51:11] Chris Mayer: If you Google Woodlock House Family Capital, that’ll my website will come up. And I’m also on Twitter, or now X, as they call it. So you can find me there as well. 

[00:51:20] Kyle Grieve: And your handle on Twitter? 

[00:51:22] Chris Mayer: It’s @chrisw M A Y E R. 

[00:51:25] Kyle Grieve: Okay, folks, that’s it for today’s episode. I hope you enjoyed the show and I’ll see you back here very soon.

[00:51:31] Outro: Thank you for listening to TIP. Make sure to subscribe to We Study Billionaires by The Investor’s Podcast Network. Every Wednesday, we teach you about Bitcoin, and every Saturday, we study billionaires and the financial markets. To access our show notes, transcripts, or courses, go to theinvestorspodcat. com.

[00:51:52] Outro: This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or rebroadcasting.


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